The Association for Financial Markets in Europe (AFME) has released comment on the
The European Commission’s proposals to bring payments and the wider financial sector into the digital age.
The new rules, that would update Payment Services Directive (PSD2) and introduce the Financial Data Access (FIDA) ruling, aim to improve consumer protection and competition in electronic payments.
In a statement commenting on both proposals, James Kemp, managing director at the AFME, says: “For financial services, [both proposals] could enable access to new, broader data sets to enhance the way banks operate, encourage innovation across sectors, and support a more effective and efficient payments system.”
The new rulings would see the amendment and modernisation of the current PSD2 which will become PSD3. PSD3 would establish, in addition, a Payment Services Regulation (PSR).
PSD3 and PSR aims to combat and mitigate payment fraud, by enabling payment service providers to share fraud-related information between themselves, increasing consumers' awareness of fraud.
This proposal ensures consumers can continue to safely and securely make electronic payments and transactions in the EU, domestically or cross-border, in euro and non-euro. While safeguarding the rights of customers, it also aims to provide greater choice of payment service providers on the market.
FIDA would establish clear rights and obligations to manage customer data sharing in the financial sector beyond payment accounts.
It would identify customers who can access their data, and for what purpose, to enhance trust in data sharing, facilitated by a requirement for dedicated permission dashboards and strengthened protection of customers' personal data — in line with the General Data Protection Regulation (GDPR).
It would also introduce standardisation of customer data and the required technical interfaces as part of financial data sharing schemes, of which both data holders and data users must become members.
Commenting further on the proposals, Kemp says: “For financial services, both the EU’s proposed FIDA framework and the proposals on PSD and PSR could enable access to new, broader data sets to enhance the way banks operate, encourage innovation across sectors and support a more effective and efficient payments system.
“AFME welcomes, in particular, the possibility of ‘reasonable’ compensation for data within FIDA, as this is crucial to ensure fair allocation of costs across the data value chain and to safeguard competition. We also believe that compensation should have been introduced in the proposed modification of PSD and PSR.
“However, with innovation comes the potential for unintended consequences, such as sharing data with participants in other sectors who may already have a dominant share of both individual and corporate data, which could lead to monopolies and the exploitation of data.”
AFME has identified four key principles to help address these risks and to support policy makers in the development of a FIDA framework and a payments services system. One key principle is to ensure a level playing field for data sharing. For a FIDA framework to flourish, there must be consistent and appropriate regulatory oversight, AFME says.
AFME’s Kemp goes on to say: “The new proposal includes new data sharing obligations which encompass the majority of customer data held by banks. Imposing these obligations only on financial institutions could deepen the competitive asymmetry between banks and other participants in the data economy from other sectors which are not subject to equivalent obligations.
“Both pieces of legislation should prioritise interoperability with existing frameworks and an important level of standardisation across sectors. The industry schemes set forward in FIDA will be essential to achieving this interoperability as well as ensuring a level playing field, an appropriate framework for compensation, clear liability standards and cross-sectoral data standardisation.”
He concludes: “Going forward, it is crucial that both the future FIDA framework and updated PSD and PSR take into account the broad global context of digitisation, ensuring that the EU remains open to global sources of innovation, standards and markets.
“The EU’s data sharing frameworks should be fair, competitive and safe. These principles are crucial to the development of flexible, future-proof regulation that will support the overall competitiveness and growth of the EU.”
